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Adjust withholding to reflect loss

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Q. I’ve lost money in the stock market this year, so I expect to owe less tax than I did in ’05. Can I decrease the tax withholding at my job to make up some of the difference? J.G., Tuckerton, N.J.

A. Yes. You can amend your W-4 in midyear to take into account changes in your personal circumstances, including stock losses you will be claiming on Schedule D. But a word of caution: Don’t run afoul of the estimated-tax rules. The easiest way to ensure that you won’t incur a penalty is to pay at least 100 percent of your 2005 tax liability (110 percent if your AGI for 2005 exceeded $150,000). Tip: Remember that capital losses can offset only up to $3,000 of ordinary income after offsetting capital gains.

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